You will often hear that social security should not be your primary source of income during retirement. This is because these benefits will only replace about 40% of your salary if you earn an average income, and most seniors need to replace about 70% to 80% of their previous income to live comfortably.
But even if you have a nice, robust nest egg on top of Social Security, it may still pay to increase these benefits as much as possible. The higher a monthly benefit you lock in, the more financial stability you can buy yourself through your senior years. With that in mind, here are three steps you can take to gain a more generous benefit.
1. Boost your earnings while still working
The monthly benefit you are entitled to Social Security will depend on how much you earn during your 35 highest paid years in the workforce – so if you are able to increase your income, you stand to collect a higher benefit later.
How do you increase your income? Improving your job skills is one option, but you can also get a side appearance and increase your earnings that way. As long as you report that side income to the IRS – which you are required to do anyway – it should be included in the calculation of your future monthly benefit.
2. Postpone your filing for as long as possible
Age 70 is by no means the most popular age to sign up for social security. But there is a reason why it pays to wait until then.
You are entitled to your full monthly social security benefit based on your salary history when you reach full retirement ageor OFF. FRA is either 66, 67 or somewhere in between, depending on when you were born.
For every year you end up applying for social security earlier FROM, your monthly benefit gets a boost of 8% – and to be clear, it’s a permanent boost we’re talking about. And so if you are able to sit tight until the age of 70, which is when the incentive runs out, you may end up increasing your monthly benefit quite nicely.
Undo an early filing
Although requirements at age 70 are hardly favored, age 62 is an age where seniors tend to take out benefits. That’s because it’s the earliest age you’re allowed to do it.
The problem, however, is that claims for benefits prior to FRA will result in a lifelong reduction. And if you have an FRA of 67, but you sign up for Social Security at age 62you will reduce your monthly benefit by 30%.
If it’s a scenario you end up in, not everything is lost. This is because social security gives you one option in your life to undo your application and claim benefits again at a later age.
To undo your application, you will not just withdraw your application for benefits. You must also repay all the benefits you have received to date. But if you are able to do that, you can claim social security later in life – and get a higher monthly benefit as a result.
No matter how much money in savings you bring into retirement, it never hurts to raise your social security benefit as much as you can. These movements can be your ticket to a higher benefit – and more financial peace of mind for the rest of your life.
The $ 18,984 social security bonus completely overlooks most retirees
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